<PAGE>
EXHIBIT 99.2
REPORT OF THE INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
GSS Array Technology Public Company Limited
We have audited the accompanying consolidated balance sheets of GSS Array
Technology Public Company Limited and its subsidiaries as at November 24, 1999
and 1998, and the related consolidated statements of operations, changes in
shareholders' equity, retained earnings and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management as to their correctness and completeness of the presentation. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance as to whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of GSS Array
Technology Public Company Limited and its subsidiaries as at November 24, 1999
and 1998, and the results of operations, the changes in shareholders' equity,
retained earnings and the cash flows for the years then ended in conformity
with generally accepted accounting principles in Thailand.
Generally accepted accounting principles in Thailand do not conform to those
in the United States of America. A description of the significant differences
between these two generally accepted accounting principles and the approximate
effects of these differences on net income (loss) and shareholders' equity are
set forth in Note 28 to the consolidated financial statements.
The accompanying financial statements have been prepared on the going
concern basis, which contemplates the realization of assets and liquidation of
liabilities in the ordinary course of business. As discussed in Note 1 to the
financial statements, the Company was unable to comply with certain loan
covenants in its loan agreements with banks as at November 24, 1999 and 1998
and has suffered operating loss in 1999 and 1998. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management plans in regards to these matters and also described in Note 1.
These financial statements do not include any adjustments that might result
from the outcome of this uncertainty. In addition, the financial and economic
uncertainty in the Asia and Pacific region has affected to a certain extent,
and may continue to affect, the operations of the Company.
Our audits also comprehended the convenience translation of the Thai Baht
amounts into U.S. dollar amounts and, in our opinion, such translation has been
made in conformity with the basis stated in Note 2.4. The translation of the
financial statement amounts into U.S. dollars and the translation of the
financial statements into English have been made solely for the convenience of
readers in the United States of America.
/s/ Deloitte Touche Tohmatsu Jaiyos
Bangkok, Thailand
December 24, 1999
(June 30, 2000 as to Notes 1, 2.4, 28, 29 and 30)
1
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As at November 24,
<TABLE>
<CAPTION>
1999 1998
------------------- ---------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Assets
Current Assets
Cash in hand and at banks (Note 4.1) ......... 359,354 9,262 101,965
Short-term investments (Note 6) .............. 27,168 700 18,608
Trade accounts and notes receivable (Note 7)
............................................. 969,684 24,992 1,032,750
Less Allowance for doubtful accounts (Notes
3.3 and 7) .................................. (323,771) (8,345) (259,541)
---------- ------- ---------
Net trade accounts and notes receivable....... 645,913 16,647 773,209
---------- ------- ---------
Inventories (Notes 3.4 and 8) ................ 966,015 24,897 1,509,182
Other current assets
Other receivable.............................. 17,249 445 10,225
Receivable from Revenue Department............ 16,531 426 8,808
Deposit in an Escrow Trust account (Note 9)... 19,623 505 --
Others........................................ 39,172 1,010 61,617
---------- ------- ---------
Total Current Assets......................... 2,091,025 53,892 2,483,614
---------- ------- ---------
Property, Plant and Equipment (Notes 3.5 and
10)........................................... 693,932 17,885 1,013,110
Other Assets
Property for disposal (Notes 3.6 and 11) ..... 315,706 8,137 343,733
Loan to director (Note 22.1) ................. 23,985 618 22,513
Others........................................ 5,547 143 6,192
---------- ------- ---------
Total Assets................................. 3,130,195 80,675 3,869,162
========== ======= =========
Liabilities and Shareholders' Equity
Current Liabilities
Bank overdrafts and loans from financial
institutions (Note 14) ...................... 939,770 24,221 1,406,933
Trade accounts and notes payable.............. 1,066,129 27,478 968,511
Current portion of long-term liabilities (Note
15) ......................................... 13,710 353 36,752
Long-term liabilities converted to current
liabilities according to contracts (Note
15).......................................... 434,921 11,209 582,444
Other current liabilities
Accrued salary and bonus...................... 54,487 1,404 92,896
Others........................................ 184,335 4,751 86,759
---------- ------- ---------
Total Current Liabilities.................... 2,693,352 69,416 3,174,295
---------- ------- ---------
Long-Term Liabilities (Note 15) ............... 150,810 3,887 62,195
Other Liabilities
Provision for income tax...................... 1,996 51 --
Deferred tax liability (Note 3.8)............. 950 24 --
---------- ------- ---------
Total Liabilities............................ 2,847,108 73,378 3,236,490
---------- ------- ---------
Shareholders' Equity
Share Capital (Note 16) .......................
Authorized share capital--22,050,000 ordinary
shares of Baht 10.00 each....................
Issued and paid-up capital 21,075,900 ordinary
shares of Baht 10.00 each, fully paid........ 210,759 5,432 210,759
Premium on Share Capital....................... 967,277 24,930 967,277
Retained Earnings (Deficit)....................
Appropriated Statutory reserve (Note 18) ..... 21,000 542 21,000
Unappropriated (deficit)...................... (1,001,613) (25,815) (684,026)
Accumulated Foreign Currency Translation
Adjustments (Note 2.3) ....................... 85,664 2,208 117,662
---------- ------- ---------
Total Shareholders' Equity................... 283,087 7,297 632,672
---------- ------- ---------
Total Liabilities and Shareholders' Equity..... 3,130,195 80,675 3,869,162
========== ======= =========
</TABLE>
Notes to the consolidated financial statements form an integral part of these
statements.
2
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended November 24,
<TABLE>
<CAPTION>
1999 1998
-------------------- ----------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Revenues
Sales........................................ 9,397,339 242,199 9,766,347
Gain on exchange............................. -- -- 60,548
Other income................................. 33,808 871 52,496
---------- -------- ----------
Total Revenues........................... 9,431,147 243,070 9,879,391
---------- -------- ----------
Expenses
Cost of sales................................ 8,780,789 226,309 9,165,049
Selling and administrative expenses.......... 608,432 15,681 642,360
Interest expenses............................ 198,452 5,115 227,693
---------- -------- ----------
Total Expenses........................... 9,587,673 247,105 10,035,102
---------- -------- ----------
Loss Before Unusual or Infrequent Items and
Income Tax.................................... (156,526) (4,035) (155,711)
Unusual or Infrequent Items
Discontinued operations of subsidiaries
Loss on disposal of a business (Note 25)... 92,856 2,393 --
Impairment of assets not sold (Note 25).... 66,129 1,704 --
Loss on early termination of assets (Notes 10
and 11)........................................ -- -- 47,527
Write off of goodwill (Notes 3.7 and 12)........ -- -- 404,940
Provision for bad debts (Note 7)................ -- -- 251,057
Provision for obsolete inventory (Note 8)....... -- -- 183,280
---------- -------- ----------
Loss Before Income Tax......................... (315,511) (8,132) (1,042,515)
Income Tax..................................... 2,076 53 69,289
---------- -------- ----------
Net Loss....................................... (317,587) (8,185) (1,111,804)
========== ======== ==========
(Loss) Per Share (Note 3.11)....................Baht(15.07).US$(0.39).Baht(52.75)
</TABLE>
Notes to the consolidated financial statements form an integral part of these
statements.
3
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED NOVEMBER 24,
<TABLE>
<CAPTION>
1999 1998
------------------- ----------
Baht' 000 US$'000 Baht'000
<S> <C> <C> <C>
Share Capital
Ordinary shares
Beginning balance.......................... 210,759 5,432 210,000
Additions.................................. -- 759
---------- ------- ----------
Ending balance............................. 210,759 5,432 210,759
---------- ------- ----------
Premiums on Share Capital
Premiums on ordinary shares
Beginning balance.......................... 967,277 24,930 965,000
Additions.................................. -- -- 2,277
---------- ------- ----------
Ending balance............................. 967,277 24,930 967,277
---------- ------- ----------
Retained Earnings (deficit)
Appropriated Statutory reserve
Beginning balance.......................... 21,000 542 21,000
---------- ------- ----------
Ending balance............................. 21,000 542 21,000
---------- ------- ----------
Unappropriated
Beginning balance.......................... (684,026) (17,630) 427,778
Additions (decrease)....................... (317,587) (8,185) (1,111,804)
---------- ------- ----------
Ending balance............................. (1,001,613) (25,815) (684,026)
---------- ------- ----------
Accumulated Foreign Currency Translation
Adjustment
Beginning balance.......................... 117,662 3,033 66,172
Additions (decrease)....................... (31,998) (825) 51,490
---------- ------- ----------
Ending balance............................. 85,664 2,208 117,662
---------- ------- ----------
Total Shareholders' Equity............... 283,087 7,297 632,672
========== ======= ==========
</TABLE>
Notes to the consolidated financial statements form an integral part of these
statements.
4
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Year Ended November 24,
<TABLE>
<CAPTION>
1999 1998
------------------- ----------
Baht'000 US$'000 Baht'000
<S> <C> <C> <C>
Unappropriated Retained Earnings (Deficit)
Beginning Balance........................... (684,026) (17,630) 427,778
Net loss.................................... (317,587) (8,185) (1,111,804)
---------- ------- ----------
Total Unappropriated Retained Earnings
(Deficit).................................. (1,001,613) (25,815) (684,026)
---------- ------- ----------
Appropriated Retained Earnings
Statutory reserve........................... 21,000 542 21,000
---------- ------- ----------
Total Appropriated Retained Earnings........ 21,000 542 21,000
---------- ------- ----------
Total Retained Earnings (Deficit)............. (980,613) (25,273) (663,026)
========== ======= ==========
</TABLE>
Notes to the consolidated financial statements form an integral part of these
statements.
5
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended November 24,
<TABLE>
<CAPTION>
1999 1998
----------------- ----------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss....................................... (317,587) (8,185) (1,111,804)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Discontinued operations of subsidiaries:
Loss on disposal of a business.............. 92,856 2,393 --
Impairment of assets not sold............... 66,129 1,704 --
Allowance for doubtful accounts.............. 70,037 1,805 252,773
Inventory reserve............................ 131,264 3,383 263,904
Depreciation and amortization................ 272,369 7,020 275,669
Amortization of goodwill..................... -- -- 404,940
Net decrease (increase) in deferred income
tax......................................... -- -- 73,767
Net unrealized loss (gain) on exchange....... 18,603 480 (73,671)
Loss on disposal of assets................... 55,341 1,426 49,311
-------- ------- ----------
Income from operations before changes in
operating assets and liabilities............ 389,012 10,026 134,889
(Increase) Decrease in operating assets........
Trade accounts and notes receivable.......... 20,621 531 9,009
Inventories.................................. (16,035) (413) 136,114
Other current assets......................... (26,031) (671) 25,520
Other assets................................. (827) (21) 1,509
Increase (Decrease) in operating liabilities...
Trade accounts and notes payable............. 81,695 2,106 (303,498)
Other current liabilities.................... 21,366 551 (122,198)
Other liabilities............................ 2,945 76 (10,338)
-------- ------- ----------
Net cash provided (used) by operating
activities.................................. 472,746 12,185 (128,993)
-------- ------- ----------
Cash Flows from Investing Activities
Cash received from disposal of a business of a
subsidiary.................................... 500,896 12,910 --
(Increase) Decrease in deposit with maturity of
more than 3 months............................ (8,560) (221) (8,608)
Purchase of property, plant and equipment...... (147,569) (3,803) (48,320)
-------- ------- ----------
Net cash provided (used) by investing
activities................................... 344,767 8,886 (56,928)
-------- ------- ----------
Cash Flows from Financing Activities
Increase (Decrease) in bank overdrafts and
loans from financial institutions............. (471,983) (12,165) 433,780
Increase (Decrease) in long-term loans......... (56,143) (1,447) (345,549)
Increase in share capital...................... -- -- 3,036
-------- ------- ----------
Net cash provided (used) by financing
activities................................... (528,126) (13,612) 91,267
-------- ------- ----------
Translation Adjustment.......................... (31,998) (825) 51,490
-------- ------- ----------
Net increase (decrease) in cash and cash
equivalents.................................... 257,389 6,634 (43,164)
Cash and cash equivalents at the beginning of
year........................................... 101,965 2,628 145,129
-------- ------- ----------
Cash and cash equivalents at the end of year.... 359,354 9,262 101,965
======== ======= ==========
</TABLE>
Notes to the consolidated financial statements form an integral part of these
statements.
6
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the Year Ended November 24, 1999 and 1998
1. Economic Turmoil in Asia-Pacific Region and Going Concern Considerations
Many Asia-Pacific countries, including Thailand, experienced severe economic
difficulties relating to currency devaluations, volatile stock markets, and
slowdown in growth. The operations of the Company have been affected to a
certain extent, and will continue to be affected for the foreseeable future, by
the financial and economic uncertainty in the Asia Pacific region.
As further described in Note 15, as at November 24, 1999 and 1998, the
Company was unable to comply with certain covenants in its loan agreement with
the banks as a result of incurred operating losses. The Company had obtained
letters from the banks confirming that the banks will not currently enforce
their rights under the loan agreements but this does not constitute a waiver of
default, nor is it a waiver of the banks' rights, powers and remedies pursuant
to the loan agreements and any other contracts or instruments signed by the
Company.
Management plans with respect to these matters are to continue negotiations
with banks for a permanent restructuring of the debt and negotiate for the sale
of the Company.
The financial statements have been prepared on the going concern basis,
which contemplates the realization of assets and liquidation of liabilities in
the ordinary course of business. They do not include any adjustments that might
result from the outcome of this uncertainty.
2. Basis for Preparation of the Financial Statements
2.1 The accompanying consolidated financial statements for the year
ended November 24, 1999 are presented in accordance with the form of
balance sheet and income statement for public companies as required by the
Ministerial Regulation No.7 B.E. 2539 (1996), dated October 25, 1996,
issued under the Public Companies Act, B.E. 2535 (1992) and effective for
accounting periods starting on January 1, 1997.
2.2 The consolidated financial statements include the accounts of GSS
Array Technology Public Company Limited and its subsidiaries, prepared
after eliminating significant intercompany transactions and balances.
The percentages of shareholding in subsidiaries as at November 24 are as
follows:
<TABLE>
<CAPTION>
% of
shareholding
-------------
1999 1998
------ ------
<S> <C> <C>
GSS Array Technology (Singapore) Pte., Ltd. (Incorporated in
Singapore)................................................. 100.00 100.00
GSS Array Technology Inc. (Incorporated in U.S.A.).......... 100.00 100.00
GSS Array Technology Limited (Incorporated in United
Kingdom)................................................... 100.00 100.00
</TABLE>
2.3 Balance sheet and statement of income of foreign subsidiaries are
translated into Baht at the exchange rates announced by The Bank of
Thailand, at the balance sheet date and the average exchange rates,
respectively. The translation differences have been shown as the
accumulated foreign currency translation adjustments in the shareholders'
equity.
2.4 The US$ equivalent has been provided for convenience only, at the
rate of approximately Baht 38.0 per US$1.00 being the average rate of
buying and selling rates as announced by the Bank of Thailand at February
24, 2000. Such translation should not be construed as a representation that
the Baht amounts could be converted to U.S. dollars at that or any other
rate.
7
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Significant Accounting Policies
3.1 Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of revenues, expenses, assets
and liabilities and disclosure of contingent assets and liabilities. Actual
result may differ from those estimated.
3.2 For the purposes of preparation of the statement of cash flow, cash
and cash equivalents consist of cash in hand and all types of deposits at
banks and at financial institutions with original maturities of 3 months or
less.
3.3 Allowance for doubtful accounts is based on management's evaluation
of specific accounts which are considered uncollectible.
3.4 Inventories are stated at cost or net realizable value, whichever is
the lower. Cost is determined by the first-in, first-out (FIFO) method.
3.5 Property, plant and equipment are stated at cost.
Interest incurred on funds borrowed during the construction period
relating to the expansion program is capitalized. After completion of
construction and start of production, interest incurred is recorded as an
expense.
The Company calculates depreciation by the straight-line method, based
on the estimated useful live of the assets over 5-20 years.
Subsidiaries calculate depreciation by the straight-line method, based
on the estimated useful lives of the assets, over 4-6 years. Leasehold
improvement is amortized over the lease period.
3.6 Property for disposal consists of land, buildings and building
improvement at Rangsit and Nakornrachasima plant. Land is stated at cost.
The Company continue the depreciation of buildings and buildings
improvement due to their nature of economic useful lives.
3.7 The excess of cost over book value of investments in subsidiaries at
the time of acquisition has been accounted for as goodwill in the
consolidated financial statements and is amortized by the straight-line
method over the period of 20 years. If there is a permanent impairment in
the value of an unamortized goodwill, its carrying amount will be reduced
to net realizable value by a charge to the statement of operations in the
year in which the impairment is incurred.
3.8 Deferred tax asset is recognized for all deductible temporary
differences and unused tax losses to the extent that it is probable that
profit will be available against which the deductible temporary differences
and unused tax losses can be utilised.
Deferred tax liability is recognized for all taxable temporary
differences.
3.9 The carrying amounts of all intangible assets are reviewed by the
Company periodically and to the extent that the future benefits are no
longer considered probable, they are written off to the statement of
operations.
3.10 Foreign currency transactions are recorded using the standard book-
keeping rates based on the average of the commercial bank rates which are
updated to approximate actual rates on a regular basis.
8
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The exchange rates used in translating foreign currency assets and
liabilities at the balance sheet date are those announced by The Bank of
Thailand at that date. Gains or losses on exchange are recognized in the
statement of operations.
3.11 Earnings (loss) per share are based on the number of ordinary
shares outstanding at the balance sheet date. In case of a capital
increase, the number of shares are weighted according to time of
subscription received for the increased issued and paid-up capital.
The Company has issued warrants which the warrantholders can convert to
ordinary shares. As at November 24, 1999, the Company's operation result is
a loss, therefore, no fully diluted earnings per share are presented. As at
November 24, 1999, had all the warrantholders exercised their conversion
rights, the difference between fully diluted and primary earnings per share
would not be significant.
4. Supplemental Disclosures of Cash Flow Information
4.1 Cash and cash equivalents consist of the followings:
<TABLE>
<CAPTION>
1999 1998
----------------- --------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Cash in hand and at banks....................... 359,354 9,262 101,965
Short-term investment........................... 27,168 700 18,608
------- ----- -------
386,522 9,962 120,573
Less Deposits with maturity of more than 3
months......................................... (27,168) (700) (18,608)
------- ----- -------
359,354 9,262 101,965
======= ===== =======
</TABLE>
4.2 Cash paid for interest and income tax are as follows:
<TABLE>
<CAPTION>
1999 1998
---------------- --------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Interest........................................... 191,622 4,939 224,013
Income tax......................................... 4,849 125 1,968
</TABLE>
5. Risk Management Policies for Foreign Currency
The currency of the primary economic environment in which the Company
operates is in U.S. dollars, and management believes that there is no need to
hedge currency risk against the dollars.
6. Short-Term Investments
As at November 24, 1999 and 1998, fixed deposits at a bank of Baht 26
million (US$0.6 million) and Baht 19 million respectively have been pledged as
security against bank overdrafts and loans from financial institutions (see
Note 14).
9
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Trade Accounts and Notes Receivable
Trade accounts and notes receivable are classified by aging as at November
24, 1999 and 1998 as follows:
<TABLE>
<CAPTION>
1999 1998
---------------- ---------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Not yet due (Credit term 30 days).....................436,485..11,250 502,389
Overdue 1-3 months................................... 162,082 4,177 267,937
Overdue 3-6 months................................... 72,278 1,863 240,209
Overdue over 6 months................................ 298,839 7,702 22,215
------- ------ ---------
969,684 24,992 1,032,750
======= ====== =========
</TABLE>
Consolidated allowance for doubtful account for 1999 and 1998 were Baht 324
million (US$8,345 thousand) and Baht 260 million, respectively.
As at November 24, 1998, the Company had set up an allowance for doubtful
accounts amounting to Baht 251 million for a significant customer in financial
difficulty.
8. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
1999 1998
------------------ ---------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Finished goods................................ 89,171 2,298 102,574
Work in process............................... 183,419 4,727 355,436
Raw materials................................. 903,488 23,286 1,387,090
Raw materials in transit...................... 36,366 937 39,696
--------- ------ ---------
1,212,444 31,248 1,884,796
Less Provision for obsolete inventory......... (246,429) (6,351) (375,614)
--------- ------ ---------
966,015 24,897 1,509,182
========= ====== =========
</TABLE>
As at November 24, 1998, the Company had set up a provision for obsolete
inventory amounting to Baht 183 million for excess inventory which a
significant customer is unable to purchase from the Company due to its problem
in operations.
9. Deposit in Escrow Trust Account
As of November 24, 1999, deposit in Escrow Trust Account represents a
US$500,000 of money paid by ACT Manufacturing (buyer) relating to the disposal
of business of GSS Array Technology Inc., U.S.A. (seller).
As specified in sale agreement, the money is set aside to meet any future
claims by the buyer against the seller to the disposal of business. The funds
will be released to the seller one year from the date of the agreement which
is October 11, 1999.
This amount may or may not be received in full depending on claims filed by
the buyer.
10
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Property, Plant and Equipment
Property, plant and equipment consist of the following :
<TABLE>
<CAPTION>
COST
-----------------------------------------------------------------
Balance Balance
November 25, Exchange November 24,
1998 Gain (Loss)* Additions (Disposals) 1999
------------ ------------ --------- ----------- -----------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C>
Land.................... 71,609 -- -- -- 71,609 1,846
Buildings............... 423,167 -- -- -- 423,167 10,906
Buildings improvement... 106,362 1,937 8,515 (31,464) 85,350 2,199
Machinery and
equipment.............. 1,236,307 30,620 48,203 (575,739) 739,391 19,056
Office furniture,
fixtures and
equipment.............. 128,959 3,341 11,913 (45,695) 98,518 2,539
Vehicles................ 13,487 -- 432 (2,300) 11,619 299
Capital in progress..... 1,487 -- 78,509 (64,196) 15,800 407
--------- ------ ------- -------- --------- ------
1,981,378 35,898 147,572 (719,394) 1,445,454 37,252
========= ====== ======= ======== ========= ======
<CAPTION>
ACCUMULATED DEPRECIATION
-----------------------------------------------------------------
Balance Balance
November 25, Exchange November 24,
1998 Gain (Loss)* Additions (Disposals) 1999
------------ ------------ --------- ----------- -----------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C>
Buildings............... 40,504 -- 21,162 -- 61,666 1,589
Buildings improvement... 34,333 1,114 21,421 (21,159) 35,709 920
Machinery and
equipment.............. 792,342 20,069 182,965 (426,608) 568,768 14,659
Office furniture,
fixtures and
equipment.............. 92,634 2,299 16,701 (34,848) 76,786 1,979
Vehicles................ 8,455 -- 2,093 (1,955) 8,593 220
--------- ------ ------- -------- --------- ------
968,268 23,482 244,342 (484,570) 751,522 19,367
========= ====== ======= ======== ========= ======
Property plant, and
equipment--net......... 1,013,110 693,932 17,885
========= ========= ======
Depreciation for the
year................... 244,342 6,297
========= ======
</TABLE>
--------
* Exchange Gain (loss) from translation of foreign subsidiaries' balance
sheets.
The Company has mortgaged Baht 105 million (US$3 million) and Baht 200
million as at November 24, 1999 and 1998, respectively, of book value of
machinery and equipment with banks as security against short and long term
loans. (see Notes 14 and 15).
In the 1998 consolidated financial statements, a subsidiary has assets which
are held under finance leases for Baht 81 million with a commitments as set out
in Note 20.
As at November 24, 1998, the Company had recorded additional depreciation on
certain machinery and equipment of book value amounting to Baht 17 million due
to change in useful live of the assets.
11
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Property for Disposal
Property for disposal consists of land, buildings and building improvement
located at Rangsit and Nakornrachasima plants as follows:
<TABLE>
<CAPTION>
COST
----------------------------------------------------------------------------
Balance Balance
November 25, Transferred (Transferred November 24,
1998 Additions in (Disposals) out) 1999
------------ --------- ----------- ----------- ------------ ----------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C> <C>
Rangsit-Leased Out
Land.................... 22,911 -- 4,804 -- -- 27,715 714
Buildings............... 7,962 -- 12,385 -- -- 20,347 525
Buildings improvement... 3,620 -- 966 -- -- 4,586 118
------- ----- ------ ---- ------- ------ -----
34,493 -- 18,155 -- -- 52,648 1,357
======= ===== ====== ==== ======= ====== =====
<CAPTION>
ACCUMULATED DEPRECIATION
----------------------------------------------------------------------------
Balance Balance
November 25, Transferred (Transferred November 24,
1998 Additions in (Disposals) out) 1999
------------ --------- ----------- ----------- ------------ ----------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C> <C>
Buildings............... 3,854 2,205 3,405 -- -- 9,464 244
Buildings improvement... -- 1,680 2,729 -- -- 4,409 114
------- ----- ------ ---- ------- ------ -----
3,854 3,885 6,134 -- -- 13,873 358
======= ===== ====== ==== ======= ====== =====
Rangsit leased out--
net.................... 30,639 38,775 999
======= ====== =====
Depreciation for
the year............... 3,885 358
====== =====
<CAPTION>
COST
----------------------------------------------------------------------------
Balance Balance
November 25, Transferred (Transferred November 24,
1998 Additions in (Disposals) out) 1999
------------ --------- ----------- ----------- ------------ ----------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C> <C>
Rangsit-Not Leased Out
Land.................... 53,996 -- -- -- (4,804) 49,192 1,268
Buildings............... 56,959 -- -- -- (12,385) 44,574 1,149
Buildings improvement... 5,064 -- -- -- (966) 4,098 106
------- ----- ------ ---- ------- ------ -----
116,019 -- -- -- (18,155) 97,864 2,523
======= ===== ====== ==== ======= ====== =====
</TABLE>
12
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Accumulated Depreciation
------------------------------------------------------------------------------------
Balance
November 25, Transferred Balance
1998 Additions in (Disposals) (Transferred out) November 24, 1999
------------ --------- ----------- ----------- ----------------- -------------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C> <C>
Buildings............... 16,802 6,499 -- -- (3,405) 19,896 513
Buildings improvement... -- 6,645 -- -- (2,729) 3,916 101
------- ------ --- --- ------ --------- -------
16,802 13,144 -- -- (6,134) 23,812 614
======= ====== === === ====== ========= =======
Rangsit not leased out--
net.................... 99,217 74,052 1,909
======= ========= =======
Depreciation for the
year................... 13,144 339
========= =======
<CAPTION>
Cost
------------------------------------------------------------------------------------
Balance
November 25, Transferred Balance
1998 Additions in (Disposals) (Transferred out) November 24, 1999
------------ --------- ----------- ----------- ----------------- -------------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C> <C>
Nakornrachasrima--Leased
Out
Land.................... 27,179 -- -- -- -- 27,179 701
Buildings............... 211,835 -- -- -- -- 211,835 5,460
Buildings improvement... 2,031 -- -- -- -- 2,031 52
------- ------ --- --- ------ --------- -------
241,045 -- -- -- -- 241,045 6,213
======= ====== === === ====== ========= =======
<CAPTION>
Accumulated Depreciation
------------------------------------------------------------------------------------
Balance
November 25, Transferred Balance
1998 Additions in (Disposals) (Transferred out) November 24, 1999
------------ --------- ----------- ----------- ----------------- -------------------
BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C> <C> <C> <C>
Buildings............... 26,252 10,592 -- -- -- 36,844 950
Buildings improvement... 916 406 -- -- -- 1,322 34
------- ------ --- --- ------ --------- -------
27,168 10,998 -- -- -- 38,166 984
======= ====== === === ====== ========= =======
Nakornrachasrima--net... 213,877 202,879 5,229
======= ========= =======
Depreciation for the
year................... 10,998 283
========= =======
</TABLE>
The Company continues to depreciate the property for disposal, as management
believes that such policy is prudent.
The Company has intention of selling these properties in the future.
On August 1, 1998, all properties located at Nakoranrachasima plant were
leased under 5 years agreement with a renewal option for a further 3 years.
As at November 24, 1998, the Company wrote off building improvements at the
Rangsit plant of book value amounting to Baht 31 million, which management
believes will not be recoverable.
13
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On September 30, 1998, the land and buildings located at Rangsit plant, with
book value totaling Baht 130 million were appraised by an independent
appraiser. The appraisal value was approximately Baht 140 million.
On April 21, 1998, the property located at Nakornrachasima plant was
appraised by an independent appraiser. The appraisal value was approximately
Baht 229 million.
The carrying cost of the above properties did not exceed the appraisal
value.
12. Goodwill
Goodwill as shown in the consolidated financial statements represents the
excess of cost over the book value of investment in a subsidiary at the time of
acquisition and was amortized over 20 years beginning in 1990. However, due to
substantial recurring losses from operations resulting in a capital deficiency,
the Company charged the remaining net book value of goodwill of Baht 405
million to the 1998 statement of operations.
13. Deferred Income Tax
For the year ended November 24, 1998, deferred tax asset brought forward
from prior year amounting to Baht 74 million was written off to the statement
of income as it was deemed not probable that future taxable profit would be
available against which the losses carried forward can be utilized. As required
by the Stock Exchange of Thailand, this was to comply with International
Accounting Standard No. 12.
Income tax expense in the statement of income consists of the following:
<TABLE>
<CAPTION>
1999 1998
---------------- --------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Income tax payable.............................. 2,076 53 3,394
Tax benefits from operating loss carryforward... -- -- (53,642)
Tax expense arising from the write off of
previously recorded tax benefit................ -- -- 119,537
----- --- --------
Income tax expense.............................. 2,076 53 69,289
</TABLE>
14. Bank Overdrafts and Loans From Financial Institutions
Bank overdrafts of the Company are secured by a pledge of its fixed deposits
(see Note 6) and carry interest at the minimum overdraft rate. Loans from
financial institutions of the Company are secured by the pledge of its fixed
deposits and the mortgage of land, buildings, machinery and equipment having
book value of Baht 105 million (US$3 million) and Baht 200 million as at
November 24, 1999 and 1998, respectively (see Note 10).
Loans of a subsidiary carried restrictive financial covenants.
As at November 24, 1998, the subsidiary was not in compliance with certain
covenants as specified in the loan agreements with banks. A subsidiary obtained
a letter from the bank confirming that the bank would not enforce its rights
under the loan agreement at that time but such restraint did not constitute a
waiver of default, nor was it a waiver of the banks rights, powers and remedies
pursuant to the loan agreements and any other contracts or instruments signed
by a subsidiary.
In 1999, all loans, advances and overdraft facilities from banks and other
financial institutions to the subsidiary were paid in full.
14
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Long-Term Liabilities
Long-term liabilities consist of the following:
<TABLE>
<CAPTION>
1999 1998
----------------- --------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
The Company
Loans repayable monthly from 1999 to 2003... 164,520 4,240 --
Loans repayable quarterly from 1998 to 2000
........................................... 434,921 11,209 582,444
Subsidiaries
Loan repayable in 1999 ..................... -- -- 4,519
Liabilities under finance lease agreements.. -- -- 94,428
-------- ------- --------
599,441 15,449 681,391
Less Current portion........................ (13,710) (353) (36,752)
-------- ------- --------
585,731 15,096 644,639
Less Long-term liabilities converted to
current liabilities according to
contracts.................................. (434,921) (11,209) (582,444)
-------- ------- --------
150,810 3,887 62,195
======== ======= ========
</TABLE>
Long-term liabilities of the Company and subsidiaries, denominated in
foreign currency of US$11.2 million and US$19 million as of November 24, 1999
and 1998, respectively, carry interest at the rate of LIBOR+3 and are secured
by mortgage of land, buildings, machinery and equipment having book value of
Baht 105 million (US$2 million) and Baht 200 million (see Note 10). Such loan
carry restrictive covenants pertaining to the performance and the ratio of debt
to equity.
As at November 24, 1999 and 1998, the Company's debt to equity ratio,
exceeded that contained in the loan agreement. Accordingly, the Company
presented the long-term liabilities as current liabilities under the heading of
"long-term liabilities converted to current liabilities according to contracts"
in order to comply with generally accepted accounting principles. For the year
1999 and 1998, the Company had obtained letters from the banks confirming that
the banks will not enforce their rights under the loan agreements at this time
but this does not constitute a waiver of default, nor is it a waiver of the
banks' rights, powers and remedies pursuant to the loan agreements and any
other contracts or instruments signed by the Company.
16. Share Capital
On February 23, 1998, April 9, 1998 and September 22, 1998, the issued and
paid-up capital increased by Baht 150,000, Baht 559,000 and Baht 50,000,
respectively, and premiums on share capital increased by Baht 450,000 and Baht
1,677,000 and Baht 150,000, respectively, from the exercise of warrants (see
Note 17).
17. Stock Option Plan
The shareholders passed a resolution on November 21, 1996 to issue 1,050,000
ordinary share warrants to be allocated to certain directors and employees of
the Company. The issued warrants will not be listed in the Stock Exchange of
Thailand. The holders of warrants will have the right to buy ordinary shares of
the Company according to the ratio and the exercise price stated in the
warrants and these warrants can be exercised over the 5 years period.
In addition, the shareholders also passed a resolution to increase the
registered capital by Baht 10,500,000 by an issue of 1,050,000 new ordinary
shares of Baht 10.00 par value each, as an accommodation for the exercise of
warrants.
15
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On January 30, 1998, March 26, 1998 and September 22, 1998, 15,000 warrants,
55,900 warrants and 5,000 warrants, respectively, were exercised at the price
stated in the warrants of Baht 40.00 each. Paid-up capital increased by Baht
150,000, Baht 559,000 and Baht 50,000, respectively, and premiums on share
capital increased by Baht 450,000 and Baht 1,677,000 and Baht 150,000,
respectively (see Note 16). The Company registered such increased issued and
paid-up capital with the Department of Commercial Registration on February 23,
1998, April 9, 1998 and September 22, 1998, respectively.
974,100 warrants have not been exercised as at November 24, 1999.
Stock options to purchase 974,100 shares of ordinary share at Baht 40
(US$1.11) per share were outstanding as of November 24, 1999 but were not
included in the computation of diluted EPS because the options' exercise price
was greater than the average market price of the ordinary shares.
18. Statutory Reserve
Under the Public Companies Act, the Company is required to set aside as a
statutory reserve for at least 5% of its net profit, after accumulated deficit
brought forward (if any), until the reserve is not less than 10% of the
authorized capital.
19. Disclosure of Financial Instruments
In accordance with directives from The Stock Exchange of Thailand dated
October 21, 1998, the Company is required to adopt the International Accounting
Standard (IAS) No. 32-Presentations and Disclosure of Financial Instruments as
a guideline for disclosure of the Company's financial instruments both on-
balance sheet and off-balance sheet.
19.1 Credit risk
Credit risk refers to the risk that counter party will default on its
contractual obligations resulting in a financial loss to the Company and
its subsidiaries. Concentrations of the credit risk with respect to trade
receivables are limited due to the large number of customers comprising the
customer base, and their dispersion across different geographic regions.
In the case of recognized financial assets, the carrying amount of the
assets recorded in the consolidated balance sheet, net of a portion of
allowance for doubtful debts, represents the Company and its subsidiaries
maximum exposure to credit risk.
19.2 Interest rate risk
Interest rate risk in the balance sheet arises from the potential for a
change in interest rates to have an adverse effect on the net interest
earnings of the Company in the current reporting period and in future
years. The Company does not expect to incur material incremental effect on
its interest expenses.
19.3 Fair value of financial instruments
The following methods and assumptions were used by the Company and its
subsidiaries in estimating fair value of financial instruments as disclosed
herein:
Cash in hand and at banks, short-term investments and trade accounts
and notes receivable; the carrying values approximate their fair
values.
16
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Bank overdraft and loans from financial institutions and trade
accounts and notes payable; the carrying amounts of these financial
liabilities approximate their fair values.
Long-term liabilities with floating rate of interest; the fair value
of the loans cannot be determined as they are loans from banks which
have no market fair value comparatives.
20. Long-Term Lease Agreements
The Company and subsidiaries have long-term lease agreements with amounts of
lease payments as follows:
Operating Lease
<TABLE>
<CAPTION>
Year 1999 1998
---- ---------------- --------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
1999............................................. -- -- 63,970
2000............................................. 51,650 1,331 56,597
2001............................................. 48,471 1,249 49,656
2002............................................. 43,138 1,112 38,286
2003............................................. 42,434 1,094 39,792
2004............................................. 42,434 1,094 42,438
2005............................................. 10,607 273 7,302
Finance Lease
<CAPTION>
Year 1999 1998
---- ---------------- --------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
1999............................................. -- -- 39,753
2000............................................. -- -- 38,059
2001............................................. -- -- 19,432
2002............................................. -- -- 11,412
------ ----- -------
-- -- 108,656
Less Interest cost............................... -- -- (14,228)
------ ----- -------
-- -- 94,428
Less Current portion............................. -- -- (32,233)
------ ----- -------
-- -- 62,195
====== ===== =======
</TABLE>
21. Commitment and Contingent Liabilities
The Company has contingent liabilities to bank for letters of guarantee as
at November 24, 1999 and 1998 amounting to Baht 26 million (US$0.7 million) and
Baht 5 million, respectively.
17
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
22. Transactions with Related Parties
Transactions and outstanding balances of such transactions at the year-end
are as follows:
22.1 Loans to Director-Related Party
<TABLE>
<CAPTION>
1999 1998
---------------- --------
BAHT'000 US$'000 BAHT'000
<S> <C> <C> <C>
Beginning Balance................................. 22,513 580 22,513
Addition.......................................... 1,472 38 --
------ --- ------
Ending balance.................................... 23,985 618 22,513
====== === ======
</TABLE>
22.2 Directors' remuneration
No declaration for directors' remuneration for the year 1999 and 1998.
22.3 Stock option plan
See Note 17.
23. Investment Promotion Certificates
The Company is granted certain rights and privileges as a promoted industry
under the Investment Promotion Act of B.E. 2520 (1977), including exemption
from customs duties for certain machinery imported for the manufacturing plant,
and exemption from income tax on profit from the operations as follows:
<TABLE>
<S> <C>
Investment promotion certificate No.
1354/1995 dated May 31, 1995.......... Exemption from income tax on profit
from the project at Nakornrachasima
for a period of 7 years from the
date of receiving operating
revenues.
Investment promotion certificate No.
7012/Yor/1996 dated April 26, 1996.... Exemption from income tax on profit
from the project at Ayudhaya for a
period of 6 years from the date of
receiving operating revenues.
</TABLE>
The Company thus has to comply with certain conditions contained in the
promotion certificates.
18
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
24. Company's Revenues
To comply with the Announcement of the Board of Investment No. Por. 14/2541
(1998) dated December 30, 1998, the Company's revenues for the year ended
November 24, 1999 classified under non-promoted and promoted-local and export
businesses are as follows:
<TABLE>
<CAPTION>
Promoted Non-promoted 1999 Total
--------- ------------ -----------------
BAHT'000 BAHT'000 BAHT'000 US$'000
<S> <C> <C> <C> <C>
Revenues from sales
Domestic........................... 3,396 -- 3,396 88
Export............................. 7,657,114 1,736,829 9,393,943 242,112
--------- --------- --------- -------
Total............................. 7,660,510 1,736,829 9,397,339 242,200
========= ========= ========= =======
</TABLE>
25. Discontinued Operations of Subsidiaries
On October 11, 1999, the Company's wholly owned subsidiary, GSS Array
Technology Inc, ceased its manufacturing activities in San Jose, California. A
substantial portion of inventory and fixed assets were sold for cash. The sale
was valued at Baht 501.8 million (US$12.9 million), and book value of assets
sold and expenses incurred was Baht 594.6 million (US$15.3 million). Remaining
orders from customers were assumed by the buyer, (a major US subcontract
manufacturer).
The activity of the US subsidiary is reduced to Sales, Marketing and
Purchasing to support the activities in Thailand.
In November 1999, the Company's wholly owned subsidiary in Wales, UK, ceased
all its repair activities, resulting in the termination of all associated
employees. Provision for the impairment of assets was adequately made, and all
contingent liabilities identified and accrued for Sales and Marketing
activities for the benefit of the Thailand operation will continue to be
supported.
The cessation of manufacturing activities and sale of assets in the
Company's subsidiary in United States, resulted in losses of Baht 158.9 million
(US$4.1 million) classified under infrequent items, of which Baht 92.8 million
(US$2.4 million) was attributed to the sale of assets, and Baht 66.1 million
(US$1.7 million) resulted from provisions against impairment of assets not
sold.
26. Preparation for the Readiness to Cushion the Problems of the Year
2000(Unaudited--Not Covered by Report of The Independent Auditors)
No problems have been encountered with the Company's and Subsidiaries'
computer systems and manufacturing equipment.
19
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
27. Financial Information by Segment
The Company and its subsidiaries' operations involve a single industry
segment in electronic component assembly and carried on business in Thailand
and foreign geographic areas. Geographical segment information of the Company
and its subsidiaries as of and for the year ended November 24, 1999 and 1998
are as follows:
<TABLE>
<CAPTION>
Domestic Foreign Total Elimination Grand Total
-------- ------- ----- ----------- -----------
Million of Baht
<S> <C> <C> <C> <C> <C>
1999
Net sales
--Outside customers....... 7,603 1,794 9,397 -- 9,397
--Other segment........... 57 -- 57 (57) --
----- ----- ----- ------ -----
7,660 1,794 9,454 (57) 9,397
----- ----- ----- ------ -----
Other income
--Outside customers....... 30 -- 30 -- 30
--Other segment........... -- 173 173 (169) 4
----- ----- ----- ------ -----
30 173 203 (169) 34
----- ----- ----- ------ -----
Operating profit............ 650
Expense..................... (609)
Interest expense............ (199)
-----
Loss before unusual or
infrequent items........... (158)
Unusual or infrequent
items...................... (158)
-----
Loss before income tax...... (316)
Income tax.................. (2)
-----
Net loss.................... (318)
=====
Property, plant and
equipment.................. 711 4 715 (21) 694
Others...................... 3,218 295 3,513 (1,077) 2,436
----- ----- ----- ------ -----
Total assets................ 3,929 299 4,228 (1,098) 3,130
===== ===== ===== ====== =====
</TABLE>
20
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Domestic Foreign Total Elimination Grand Total
-------- ------- ----- ----------- -----------
Million of US$
<S> <C> <C> <C> <C> <C>
1999
Net sales
--Outside customers....... 196 46 242 -- 242
--Other segment........... 2 -- 2 (2) --
--- --- --- --- ---
198 46 244 (2) 242
--- --- --- --- ---
Other income
--Outside customers....... 1 -- 1 -- 1
--Other segment........... -- 5 5 5 --
--- --- --- --- ---
1 5 6 5 1
--- --- --- --- ---
Operating profit............ 17
Expense..................... (16)
Interest expense............ (5)
---
Loss before unusual or
infrequent items........... (4)
Unusual or infrequent
items...................... (4)
---
Loss before income tax...... (8)
Income tax.................. --
---
Net loss.................... (8)
===
Property, plant and
equipment.................. 18 1 18 (1) 17
Others...................... 83 7 91 (28) 63
--- --- --- --- ---
Total assets................ 101 8 109 (29) 80
=== === === === ===
</TABLE>
21
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Domestic Foreign Total Elimination Grand Total
-------- ------- ------ ----------- -----------
Million of Baht
<S> <C> <C> <C> <C> <C>
1998
Net sales
--Outside customers...... 6,570 3,196 9,766 -- 9,766
--Other segment.......... 263 -- 263 (263) --
----- ----- ------ ------ ------
6,833 3,196 10,029 (263) 9,766
----- ----- ------ ------ ------
Other income
--Outside customers...... 96 17 113 -- 113
--Other segment.......... -- 203 203 (203) --
----- ----- ------ ------ ------
96 220 316 (203) 113
----- ----- ------ ------ ------
Operating profit........... 531
Expense.................... (1,346)
Interest expense........... (228)
Income tax................. (69)
------
Net loss................... (1,112)
======
Property, plant and
equipment................. 1,084 188 1,272 -- 1,272
Others..................... 2,584 1,377 3,961 (1,364) 2,597
----- ----- ------ ------ ------
Total assets............... 3,668 1,565 5,233 (1,364) 3,869
===== ===== ====== ====== ======
</TABLE>
22
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
28. Summary of Significant Differences Between Accounting Principles Followed
by the Company and Generally Accepted Accounting Principles in the United
States
The Company's consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the Kingdom of
Thailand (Thai GAAP), which differs in certain respects from U.S. GAAP.
The differences, as they affect the financial statements, are reflected in
the approximations provided in Note 29 and arise due to the items discussed in
the following paragraphs:
Functional Currency
Under Thai GAAP, the functional currency is to be the Thai baht. Under U.S.
GAAP, FASB No. 52 requires that an entity's functional currency is to be the
currency of the primary economic environment in which that entity operates.
Company's management has determined that under U.S. GAAP, the company's
functional currency should be the U.S. dollar.
Long-lived Assets to be disposed of
While not addressed under Thai GAAP, the Company depreciated long-lived
assets to be disposed of.
Under U.S. GAAP, long-lived assets to be disposed of are reported at the
lower of carrying amount or fair value less cost to sell. Depreciation on such
assets is not recognized.
Unusual or infrequent items
Under Thai GAAP, a material event or transaction that is unusual in nature
or occurs infrequently but not both, and therefore does not meet both criteria
for classification as an extraordinary item, should be reported as separate
component of income from continuing operations by presenting before income
before extraordinary items. Disposals of subsidiaries are categorized as
discontinued operations of subsidiaries. Under U.S. GAAP, unusual or infrequent
items should be reported as operating items, and discontinued operations
represent only those disposals or abandonments of business segments as defined
by APB Opinion No. 30.
Reporting Comprehensive Income
Under U.S. GAAP, SFAS No. 130, Reporting Comprehensive Income, requires an
enterprise to display an amount representing total comprehensive income for
each period of operations presented in the financial statements. Comprehensive
income comprises net income and other comprehensive income such as unrealized
gains and losses on securities, foreign currency translation adjustments and
minimum pension liability adjustments. In addition, an enterprise is required
to classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. Reclassification of financial
statements for earlier periods provided for comparative purposes is also
required.
Thai GAAP does not address the reporting or disclosure of comprehensive
income.
23
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
29. Reconciliation Between Net Income and Shareholders' Equity Under Thai GAAP
and U.S. GAAP
<TABLE>
<CAPTION>
Year ended November 24,
-----------------------------------------
1999 1998
-------------------------- -------------
In Thousands of Thai Baht and Thousands
of U.S.$
Except Per Share Data
<S> <C> <C> <C>
Net (loss) according to the
financial Statements prepared
under Thai GAAP................ Bht (317,587) US$ (8,185) Bht(1,111,804)
U.S. GAAP adjustments
Increase (decrease) due to:
Depreciation on assets to be
disposed of................... Bht 13,144 US$ 338 Bht 12,371
Functional currency change..... Bht (17,786) US$ (458) Bht (422,654)
------------ ------------ -------------
Approximate net loss in
accordance With U.S. GAAP...... Bht (322,229) US$ (8,305) Bht(1,522,087)
============ ============ =============
Basic Loss Per Share............ Bht (15.29) US$ (0.39) Bht (72.22)
Diluted Loss Per Share.......... -- -- --
Weighted average number of
shares (Thousands)
Basic.......................... Share 21,076 Share 21,076 Share 21,076
Diluted........................ -- -- --
</TABLE>
<TABLE>
<CAPTION>
Year ended November 24,
---------------------------------
1999 1998
-------------------- ------------
In Thousands of Thai Baht
and Thousands of U.S.$
<S> <C> <C> <C>
Stockholders' equity according to the
financial statements prepared under
Thai GAAP.............................. Bht283,087 US$ 7,296 Bht 632,672
U.S. GAAP adjustments
Increase (decrease) due to:
Depreciation on assets to be disposed
of.................................... Bht 25,515 US$ 657 Bht 12,371
Functional currency change............. Bht490,497 US$12,643 Bht 400,016
Approximate stockholders' equity
In accordance with U.S. GAAP........... Bht799,099 US$20,596 Bht1,045,059
</TABLE>
With regard to the balance sheets and statements of income, the following
other significant captions determined under U.S. GAAP would have been:
<TABLE>
<CAPTION>
Year ended November 24,
-----------------------------------
1999 1998
---------------------- ------------
In Thousands of Thai Baht
and Thousands of U.S.$
<S> <C> <C> <C>
Balance sheets
Property, plant and equipment........... Bht1,005,346 US$25,911 Bht1,324,903
Total other assets...................... Bht 568,457 US$14,651 Bht 533,871
Total assets............................ Bht3,646,206 US$93,974 Bht4,281,552
Total current liabilities............... Bht2,693,352 US$69,416 Bht3,174,298
Total liabilities....................... Bht2,847,106 US$73,379 Bht3,236,493
</TABLE>
The following table presents comprehensive income for the year ended
November 24, 1999
<TABLE>
<CAPTION>
Year ended November
24,
----------------------
1999
----------------------
In Thousands of Thai
Baht
and Thousands of
U.S.$
<S> <C> <C>
Net loss (U.S. GAAP)............................... Bht(322,229) US$(8,305)
Foreign currency translation adjustments .......... Bht 76,270 US$ 1,965
----------- ---------
Comprehensive income (loss) ....................... Bht(245,959) US$(6,340)
</TABLE>
24
<PAGE>
GSS ARRAY TECHNOLOGY PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
30. Additional Financial Statement Disclosures Required Under U.S. GAAP
Income Taxes
Substantially all of the Company's income is earned in Thailand.
Accordingly, the Company is not subject to income tax in other countries to any
significant extent.
In providing for applicable deferred income taxes under U.S. GAAP, the tax
effect of significant temporary differences has been added by the tax effect of
available tax loss carry forwards, as follows:
<TABLE>
<CAPTION>
Year ended November 24,
------------------------------------
1999 1998
----------------------- -----------
In Thousands of Thai Baht
and Thousands of U.S.$
<S> <C> <C> <C>
Deferred income tax assets resulting
principally from:
Inventory reserve....................... Bht 90,334 US$ 2,328 Bht 65,251
Bad debts reserve....................... Bht 89,473 US$ 2,306 Bht 84,018
Loss on impairment of investments in
subsidiaries........................... Bht 326,241 US$ 8,408 Bht 168,395
Add: Tax effect of available tax loss
carry forwards......................... Bht 39,171 US$ 1,010 Bht 40,290
Less: Valuation Allowance............... Bht(545,219) US$(14,052) Bht(357,954)
----------- ---------- -----------
Net deferred income tax assets.......... Bht -- US$ -- Bht --
=========== ========== ===========
</TABLE>
The statement of cash flows in accordance with U.S. GAAP is as follows:
<TABLE>
<CAPTION>
Year Ended November 24
-------------------------------------
1999 1998
------------------------ ----------------
In Thousands of the Baht and
Thousands of US $
-------------------------------------
<S> <C> <C> <C> <C>
Cash flows from:
Operating Activities............... Bht 469,960 US$ 12,112 Bht(105,642)
Investing Activities............... Bht 355,767 US$ 9,169 Bht (54,928)
Financing Activities............... Bht (545,126) US$(14,050) Bht 87,267
Effect of exchange rate changes on
cash.............................. Bht (23,212) US$ (597) Bht 30,139
------------ ---------- -----------
Net increase (decrease) in cash and
cash equivalents.................. Bht 257,389 US$ 6,634 Bht (43,164)
============ ========== ===========
</TABLE>
* * * * *
25
